Sorry guys. I have another rookie/newb question...

[Michael "Grimweird" Tan]

Err... I'm really having a hard time understanding this one.

How exactly does one lose money in Forex? Is there a cut-off period where the currency pair you invested in "expires"? If not, then in theory, wouldn't it be possible to simply hold on to what you've bought until such time that it becomes profitable to sell it?

Again, if what I'm asking is really stupid, sorry. I'm just really new at this sort of thing.

Thanks a lot in advance fellas.
Mike.

 

[forexdiscounts]

No there is no cut-off period, where a trade expires!

You can actually hold on a trade forever, as long as your account allows you to! It is a matter of Money Management. There are many issues you need to take into consideration before calculating how long you can hold a trade for (Leverage, Stop out Margin Level of your Broker, swap rate of the pair etc), but a very simple example will help you understand:

If you place a EURUSD 0.10 lots trade on a $1,000 account, then you can hold the trade up to maximum 1000 pips, because you account’s equity will be 0 when your trade goes to -1000 pips.

 

[Michael "Grimweird" Tan]

Ah I see. So as long as I have cash in my account to cover the trade I can hold on to it as long as I like.

So solvency will be my problem as I'm basically granite bedrock at the moment.

*Sigh* It takes money to make money don't it?

 

[Pharaoh]

Technically, retail forex contracts expire in 2 days, but virtually all brokers roll them over for you. This is unlike "binary options" where they can expire in as little as 60 seconds. Stay away from binary options. Forex is already an uphill climb. Binary options is closer to scaling a tall wall while people on top drop bricks on your head.

Yes, you can hold them indefinitely, but watch out for the overnight swap (and you pay/get paid triple swap on Wednesdays). Holding a pair for positive swap is called carry trading. Holding a pair earning negative swap for an extended period is a bad idea, unless that trade is moving fast enough in your direction that the profit outdistances the swap costs.

 

[Michael "Grimweird" Tan]

Technically, retail forex contracts expire in 2 days, but virtually all brokers roll them over for you. This is unlike "binary options" where they can expire in as little as 60 seconds. Stay away from binary options. Forex is already an uphill climb. Binary options is closer to scaling a tall wall while people on top drop bricks on your head.

Yes, you can hold them indefinitely, but watch out for the overnight swap (and you pay/get paid triple swap on Wednesdays). Holding a pair for positive swap is called carry trading. Holding a pair earning negative swap for an extended period is a bad idea, unless that trade is moving fast enough in your direction that the profit outdistances the swap costs.

Yep. Like I said. It's all about the money you have and how much you need to make more money... A vicious cycle for guys like me. Nevertheless as Bon Jovi sang:

Dude, you're preaching to the choir as far as BO is concerned. I have to say that despite the skulduggery, lies and outright filthy scams... They DO serve as a brutally effective "..teach 'em how to swim by pushing 'em into a lake..." training course. The trainee should really, REALLY have money to burn though

Say, a quick question before I go back to sleep... If I fund that micro account with $5 and leverage it at !:1000, I can hold on to trades for 50 pips right? Kinda a really narrow margin for error ain't it?

Thanks dude. Left a gift for you guys on the forum (if the mods haven't deleted it yet )
Mike.

 

[Pharaoh]

Let's see....

$5 and 1000:1 leverage. Now we need to know what the minimum trade size is. I'll also assume xxxUSD pairs to keep the math clean.

If you can trade nanolots, that's 1 cent a pip and $100 of money traded per nanolot. If you opened a trade, you would use $100 of your $5000, so could hold out for several hundred pips (depending on whether they let you go to zero margin or if they margin call you at some percentage of it.

If microlots (10 cents per pip), opening a single microlot would eat $1000 of your $5000. If price moves 40 pips against you, you've lost $4 and have zero margin available. As mentioned above, they might shut you down before that, depending on the exact margin call policy.

 

[Michael "Grimweird" Tan]

Let's see....

$5 and 1000:1 leverage. Now we need to know what the minimum trade size is. I'll also assume xxxUSD pairs to keep the math clean.

If you can trade nanolots, that's 1 cent a pip and $100 of money traded per nanolot. If you opened a trade, you would use $100 of your $5000, so could hold out for several hundred pips (depending on whether they let you go to zero margin or if they margin call you at some percentage of it.

If microlots (10 cents per pip), opening a single microlot would eat $1000 of your $5000. If price moves 40 pips against you, you've lost $4 and have zero margin available. As mentioned above, they might shut you down before that, depending on the exact margin call policy.

Yep $5 at 1:1000 leverage. They do allow 0.01 lot trades which I assume would be the nanolot you're talking about. I only trade these on Demo because I'm too chickens**t to try anything bigger at this time I can routinely make 10-20 cent demo profits right now, but dare not try anything higher risk until I can "read" better.

Seems fair to me. Look okay to you boss?

Good trades for good pal.
Mike.

 

[Red Herring]

Hey Mike

Hope you slept well.
You can think of starting live with a $50 account. This is safe I think and will give you more thrill than demo. If u go soon, to minimize your loss (I hope not), you can trade 0.01 lot with near $10.50 per trade. Why not see what happens with your $10.5 if u think u have done some demo and are profitable! Unfortunately, when I went live from demo, I found myself loosing rather than gaining that I was doing with demo!

 

[Michael "Grimweird" Tan]

Hey Mike

Hope you slept well.
You can think of starting live with a $50 account. This is safe I think and will give you more thrill than demo. If u go soon, to minimize your loss (I hope not), you can trade 0.01 lot with near $10.50 per trade. Why not see what happens with your $10.5 if u think u have done some demo and are profitable! Unfortunately, when I went live from demo, I found myself loosing rather than gaining that I was doing with demo!

Wazzup Red.

I'd love to start with a $50 account but I'm SO dead broke right now, I'd be lucky to start with a $10 account I lost a lot of money trading Binary Options (Deathtrap for the unwary) and I can hardly afford to eat. Plus I have a child to take of care of and this has caused me to be extremely careful with my money. I should begin working as a part-time cleaner next week after the printing company I was working for fired me after 20+ years of service. The owner died and the son who never liked me took over.

So now, I'm trying to learn Forex as soon as I can in order to help make ends meet. If I can even make $5-10 a day it would help a lot as the part-time job's pay is really very bad (equivalent to about $10 a day). I'll need to be REALLY careful with my money and my trades if I go "Live" and I think it might be better to learn all I can first before that. I think I'm an above average trader, but my current situation makes trading extremely precarious.

Thanks a lot for the suggestion though, maybe I'll put aside a little money to fund a larger account

Have a great day pal.
Mike.

 

[henyo]

Hi there mike, sorry to hear about your situation, but honestly looking at it from a positive side, you are going on the right path with forex, you can never rush it! it must be done slowly but surely, and yes the demo environment is a bit different from live, there is a saying that goes "only invest what you can afford to lose" so set your priority and even if the investment is small and earn only cents, you still earn knowledge with it. I really wish you best of luck, and happy trading and welcome to the world of forex